Stock Analysis | Walmart Outlook - Mixed Signals Amid Earnings Volatility

Market Snapshot

Walmart shares edged lower by 0.53%, reflecting a cautious market sentiment despite robust fundamental performance. The technical outlook is weak and volatile, with conflicting signals from bullish and bearish indicators.

News Highlights

• May 22: ETFs Shift Focus Post Walmart Q1 Earnings – Walmart delivered better-than-expected Q1 results but warned of tariff-driven price hikes. ETFs with high exposure to Walmart are under watch as the stock drifted lower.
• May 29: BJ’s Wholesale Club Director Buys Stock – Steven Ortega, a board member of BJ’s, purchased $199,000 worth of shares, signaling confidence in the retail sector.
• May 28: Costco's Earnings Preview – With Walmart’s earnings in the rearview, attention turns to Costco's upcoming results. Analysts forecast $4.21 per share earnings, offering a contrast to Walmart's performance.

Analyst Views & Fundamentals

Analysts remain optimistic about Walmart, with a simple average rating of 4.14 and a performance-weighted rating of 4.38. The consensus is consistent, with seven "Buy" or "Strong Buy" ratings from six institutions in the last 20 days. However, the current price trend is downward, suggesting a divergence between market expectations and actual performance.

Key Fundamental Metrics

• ROE (diluted): 11.38% – Internal diagnostic score: 4.97
• ROA: 1.85% – Internal diagnostic score: 4.97
• Net cash flow from operating activities / Operating revenue: 4.99% – Internal diagnostic score: 4.97
• Current assets turnover ratio: 4.27 – Internal diagnostic score: 4.97
• GPOA: 16.71% – Internal diagnostic score: 4.97
• Diluted earnings per share (YoY growth rate): 0.85% – Internal diagnostic score: 4.97

Money-Flow Trends

Big money is showing caution with 47.6% of large fund inflow ratios leaning negative. Retail investors aren't far behind, with 49.4% of small inflow activity also negative. The negative trend spans all fund sizes, with the most bearish outlook among large investors. This suggests that both institutional and retail players are becoming wary, likely due to earnings uncertainty and macroeconomic pressures.

Key Technical Signals

Walmart's technical outlook is mixed, with 2 bullish and 3 bearish indicators identified over the last 5 days. The internal diagnostic score is 4.74, reflecting a weak technical profile that requires caution.

Top Indicator Scores

• Bearish Engulfing: 7.95 – A bullish bias in this bearish pattern signals potential short-term reversal.
• MACD Death Cross: 8.16 – A strong bullish signal, though historically rare, this pattern has an impressive 90% win rate.
• WR Overbought: 3.48 – A neutral rise signal that has historically performed moderately well with a 52.63% win rate.
• RSI Overbought: 6.83 – This indicator shows a neutral rise and has the second-highest win rate among listed indicators at 60.47%.
• Ex-Dividend Date: 1.00 – A very bearish signal with a poor 33.33% win rate and an average return of -1.78%.
• Dividend Record Date: 1.00 – Similarly weak, this indicator has shown poor historical performance, with a 33.33% win rate and an average return of -1.78%.

Recent Chart Patterns

• August 11: WR Overbought, RSI Overbought – Signs of overbought conditions emerged in early August.
• August 12: WR Overbought, RSI Overbought, Bearish Engulfing – A mixed bag with overbought and reversal signals.
• August 15: Ex-Dividend Date, Dividend Record Date – Bearish signals aligned with dividend events.
• August 18: MACD Death Cross – A rare but powerful bullish signal appeared near the end of the analysis period.

Trend Summary

The technical model emphasizes a weak and volatile trend with a balanced mix of long and short signals. Investors are advised to monitor price movements closely, as the market is in a state of flux with no clear direction.

Conclusion

Walmart remains a fundamentally sound company with strong profitability and operational efficiency. However, the technical and market signals point to caution, with conflicting indicators and a negative fund-flow trend. Given the internal diagnostic technical score of 4.74 and a mixed analyst rating of 4.38, we recommend considering a wait-and-see approach before making any new positions. Keep an eye on upcoming earnings reports and macroeconomic developments for clearer direction.